Closed Banks and Banking Reform

August 12, 1933

Report Outline
Dissatisfaction Over Progress of Bank Reopenings
Progress of Bank Reopenings After the March Crisis
Methods Employed and Proposed to Reopen Banks
Glass-Steagall Act and Further Banking Reform
Special Focus

Dissatisfaction Over Progress of Bank Reopenings

President roosevelt, addressing the nation by radio on July 25, characterized the steps taken by his administration to establish the credit of the federal government on a firm foundation as “the base of the whole recovery plan.” Pointing to the necessity of reestablishing individual credit and restoring purchasing power, he referred to the March banking crisis and stated that only about 5 per cent of the deposits in national banks were still tied up. He admitted that the situation with respect to state banks was not so favorable, but asserted that there was “a steady reduction in the total of frozen deposits—a result much better than we had expected three months ago.”

Equal satisfaction with the progress made to date in reopening or reorganizing banks which remained closed after the national banking holiday has not been shown by various state banking authorities or by representatives of depositors in closed institutions. On the contrary, dissatisfaction over the allegedly slow progress toward clearing up of the banking situation has become pronounced within the last two months. Complaints of lack of cooperation on the part of the federal authorities have been countered by charges of inaction on the part of the state authorities or the bank officials themselves. A spokesman for the interests of depositors in closed banks was provided in June by the formation of the National Depositors Committee. This organization presented a plan for early opening of closed banks, by means of federal assistance, contending that release of the billions of dollars impounded in such institutions was essential to full success of the President's recovery program.

Indications of a purpose to hasten bank reopenings were given by the Treasury Department early in August. Whereas the Comptroller of the Currency had previously waited for officials of closed banks to submit proposals for reorganization, it. was then announced that the federal government, would take the initiative in developing plans for bank reopenings. In pursuance of this policy, it was stated that federal bank examiners had been assigned to confer with the conservators of 53 closed banks in western Pennsylvania who had not submitted plans for reorganization. “The Comptroller's office,” said Comptroller of the Currency O'Connor, “believes that this will enable the various committees and conservators greatly to expedite the review of their plans.”

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